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This was a combo it cleared up my doubts. All THANKS to youuu 🙂
1. If I understood correctly then the nominal price is a minimum value of a share that is part of the creation of company’s constitution or law and the issue price cannot be below than nominal price but it has to be either higher or equal to the nominal value, isn’t it?
2. Is it true that when a company decides to issue shares for the first time in the market then the directors can ask whatever price they want for their shares which is called a strike price and this is also called the market price, isn’t it?
3. The true price of a share is actually the market price of them in stock exchange and it is the price at which buyers and sellers trade their shares, isn’t it?
4. If the market price of a share is greater than the nominal value then the excess amount is called share premium whereas if the market price is lower than the nominal value then the difference is called share discount?
Thanks for your time and effort.
Let me know if i understood all of this correctly.
1. Public companies can issue shares at any price for the first time but when they issue the shares again then they should not issue shares at less than the nominal value?
2. I don’t get this honestly – you are saying that both the public and private companies can issue shares without listing in the stock exchange but then it must not be issued for general public!?
3. You are saying that public companies may or may not be listed in stock exchange but both of them can issue shares by law?
4. I don’t know where I am wrong here – Private companies can issue shares with or without listed on stock exchange?
5. Rights shares are issued to raise more money for the business for any future prospects but the only reason for rights shares are to raise more money?
6. The only reason we issue bonus shares is to reduce the market price of a shares in the stock exchange or there are other reasons as well?
Thanks though for your time.
9. Is it also correct that dividend is recorded in Statement of changes in equity only where not record will be made in SOPL or SOFP; is that correct?
I’m confused at this bit. When we face any intra-group trading transaction then firstly we need remove this balance by debiting payables and crediting receivables (no problem here!)
Then we need to remove the unrealized profit that was charged by the selling company to the buying company.
Let’s say parent is a selling company and subsidiary is a buying company we should debit group retained earning and credit inventory. However if the subsidiary was the selling company then we need to debit net assets and credit inventory.
The reason we credit the inventory from the consolidation is because of the fact that inventory remain unsold, therefore, we need to credit to remove any overvalued inventory from consolidation accounts?
Is that correct ?% now?
Please correct me that contingent liability and contingent consideration are two separate things!?
Then I request you again to please explain them in detail?
Correct me ask you this:
1) Contingent liability is a future liability that arising from the outcome of future event such as court case etc and it will be dealt in accordance with IAS 37.
2) Contingent liability is a subsidiary liability which will reduce the net assets of subsidiary business.
3) Journal entry would be:
– Net Assets (debit)
– Contingent liability (credit)4) Contingent consideration is when the parent company will pay money to the subsidiary at a future time because the value of the subsidiary business has increased after the acquisition but only if a specific condition has met by the subsidiary.
For eg subsidiary profits has increased by 10% after the acquisition then the parent company will pay the subsidiary the cash in future.
5) Contingent consideration Journal entry would be:
Net Assets (debit)
Contingent consideration (credit)Is that all correct ??
I understand your points but could you please correct my points (4 and 5) above what I said was correct or not?
I have few more queries:
1) Future value is used to calculate for investment purpose where the consideration will be received in future to see how much our money will grow over time and earn with simple or compound interest effect being added to the final consideration to be received in future from our investment at present.
2) We calculate Future value by taking the present value of money being invested today and adding the simple or compound interest effect over the period like FV = PV x (1+r)^n
3) The purpose we calculate future value is to see how much our investment will earn in future with the interest effect being added upon our initial investment to make us profitable (i.e. NPV+)?
3) Future value is also known as Final value?
4) Present value is used to calculate for liability purpose where the deferred consideration will be due/paid in future. We used it to see how much we will owe at present time (today) from our liability that will be paid in future.
5) We calculate Present value by discounting the Future cashflows (FV of money) back to the PV (as u said :)) to see how much money will be paid in future after adding on the interest over the period.
6) The problem with calculating PV is that it discounts our future cashflows which means we have less amount unless we add interest by unwinding the deferred consideration to compensate for the difference between Future value and Present value which is the interest caused by time value for money?
7) The purpose of calculating PV is to see how much our future liability will cost at present (today) with the interest effect being added upon our initial liability to make us decision to take up the loan (i.e. NPV+) or not?
8) The purpose of calculating both the FV and PV of a liability or investment is to seperate the costs of principal and interest so we can recognize them separately each year in our financial statements?
Please correct me understanding this. I apologised for taking your time. I hope you don’t mind 🙂
In other words, total equity attributable and owned by the parent’s shareholders is $1540 whereas the NCI shareholders owned $260. The total equity therefore would be $1800 owned by the shareholders of parent and NCI combined?
Is that correct?
I get confused because in your lecture you said that $1540 is attributable to NCI so i thought it is owned by NCI shareholders (although it is owned by the parent’s shareholders so don’t you say that it is attributable to parent and not NCI?!
My questions are related to my previous questions.
1) This gives us the share value of the NCI?
2) (part a) Is it true that Fair value at acquisition is actually the market value of the shares of the NCI group at the acquisition date?
2) (part b) Is it true that post-acquisition movement in net assets/equity is caused by the post-acquisition profit (retained earnings) only whereas any decrease in their shares value is because of decrease in their assets (i.e. impairment) which happens because the market value of the assets are less than their book value (am i correct until here?) but does it include non-current assets/ intangible assets or all the assets combined (please mention?)
3) What you mean here is when it is not given then we calculate the FV of NCI based on Net Asset method (because we’ve not all the information) BUT if it is given in the question then it is calculated based on FV method which gives us different answer because of post-acquisition profits only (unless they both result in same answer)?
4) Is it also correct that the value of a subsidiary is actually its market value (or fair value) and it is assessed by the shares holding of a minority group called NCI?
I apologize for lengthy question 🙂
Sorry to ask again but you stated in lecture that revenue expenditure is the running cost of the machine because it is the machines that earn revenues.
1. Capital expenditure is the cost of puchasing the non-current assets like PPE, machines, building etc.
I have two questions regarding revenue expenditure:
2. Revenue expenditure is the cost of all the operating expenses related to the NCAs only like maintenance & repair costs, lubrication cost, electricity cost etc.
3. Revenue expenditure is the cost of all the operating expenses of the company like Telephone cost, Factory rent expense, Bad debt and Interest expense etc.
What I have written is correct?